Economists Say Europe Facing 'Lost Decade'

The austerity measures being rolled out in countries across Europe will have a devastating effect on the living standards of its population, an economist told CNBC Friday.

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"These reforms are going to be devastatingly impacting on the population in these countries.

We are looking at a decade of lost living standards across most of Europe. The austerity measures are part of the solution but they are also going to deepen the downturn," James Shugg, senior economist at Westpac, told CNBC.

He added that countries would be facing a prolonged period of hardship because tax revenues would also be hit.

"Europe needs to pull out all the stops and learn from its mistakes to ensure it can come through this with the least possible damage.

There is no easy solution to this, it will be hugely painful," he said.

Robert Parker, senior advisor at Credit Suisse, questioned whether a solution even existed for the current debt crisis.

He told CNBC that even the much talked-about 'big bazooka' option of using a joint Eurobond as a backstop may not work.

"People are waiting for a Eurobond but there is clear German political resistance to that. In any event, how many Eurobonds can you issue? The question is really what would the size of a Eurobond issuance be? The answer is, it's going to be no way near the size of sovereign debt in the euro zone," Parker said.

He added the attempts by policymakers to prevent the contagion effect of the crisis from taking hold in the euro zone had failed this week.

"Contagion stress has spread to France and other economies as well. The pressure is building up and regrettably I don't see any of that capital market pressure reversing," Parker added.

Leif Eskesen, chief economist HSBC, agreed with this sentiment and said that the current 'Grand Plan' by Europe seemed more like a 'Grand Fiasco' because of a lack of details, slow implementation and doubts.

"We need a broad pan-nation solution to get this contagion risk under control. We cannot just wait for Italy and Spain to do their job. There has to be a broader solution, now," Eskesen said.